Have we been doing IT wrong?
December 29, 2019
If treated as an asset, not a cost center, IT has the power to change the way organizations win.
Within the past year, three Fortune 500 companies have appointed former CIOs as chief financial officers. Goldman Sachs, Norfolk Southern and most recently GE are signaling to the market that IT is a strategic asset worth investing in.
This comes on the heels of major market shifts, including the globalization of digital capabilities, agile entrants disrupting traditional businesses and radically changing consumer expectations. Every industry is being impacted by disruptors, from Amazon to FinTechs, altering consumer expectations and the competitive playing field. A recent MuleSoft report, for example, showed that a quarter of European respondents would consider using Amazon, Google, Facebook or Apple rather than a traditional bank in the future.
In a world where Facebook could soon become our primary bank and Amazon our primary grocery store, traditional businesses can no longer play defense. It’s putting significant pressure on these companies to undergo digital transformation, likely explaining why more firms are adding IT chiefs to corporate boards. With everything turning digital, traditional companies need to change the way they operate and rethink their five-year strategy.
The changing value of IT
As companies increasingly tap into the cloud, mobile, IoT and AI technologies, more of the value companies provide to customers, partners and employees are through digital products and services. Therefore, if what an organization sells is digital and if an organization’s employees rely on digital services to do their jobs, shouldn’t these digital capabilities be treated as assets the company continues to invest and divest in based on the value they add to the business?
The short answer is yes. Yet, it’s worth considering how that changes IT and the relationship between IT and the business. For example, if data is an asset, how should CIOs package it for broad consumption? Or, how should CIOs measure the leverage gained from applications and services to determine future investment?
In the past, IT was a way of getting one-off projects delivered as quickly and cheaply as possible. It resulted in undesirable short-term behavior, leading to a ball of complexity growing at the core of the IT organization. Consequently, future projects slowed down, and shadow IT crept in as business users risked data security to download their own tools to move at faster speeds.
Everyone in IT knows this story, and most of the business side hasn’t cared. The business typically only cares about the speed and cost at which something is delivered, not the approach taken. This pressure on IT to move faster and to do it cheaply has created a complex weave of connections between applications and data that grinds IT to a halt, and nobody gets what they need. But, the stakes are too high to ignore now. We are in enterprise Darwinism, where the fast and nimble survive, not the biggest.
For IT to make the shift from a tactical function into a strategic business partner, CIOs should embrace the three concepts below:
1. Culture first. Technology second
Contrary to what one might think, digital transformation relies first and foremost on a culture shift, not technology. In most organizations, teams work in silos and build each new project from scratch or buy a cheap solution. This habit needs to change, and CIOs are responsible for educating the business on why the old model doesn’t work and why it is critical to creating reusable assets that others can leverage. It first requires a mindset change to assume that what we need already exists and to then have a central marketplace for discovery.
2. Reuse is king
In order to move IT away from a project order taker, CIOs should package up data and capabilities as reusable assets and expose them in a central marketplace so a broader range of consumers can self-serve. APIs have become the de facto way of packaging up and exposing valuable data, as evidenced by Twilio, Expedia, and Stripe. In addition, as more assets are added to the marketplace, they can be seamlessly composed and recomposed, adding further agility to the business as assets can be quickly plugged in and out as market conditions change. These APIs and the marketplace are the application network that enables the discovery, self-service and management of assets that are used to build all products, applications, and processes going forward.
3. KPIs set the stage
To determine what IT assets to invest and divest in, CIOs need to define production and consumption KPIs. Production KPIs measure delivery capability—such as how long it takes to build an API, microservice or integration—providing more insight into where bottlenecks reside. Additionally, production KPIs can measure the quality of individual components to provide insights on where improvements are needed. Consumption KPIs, on the other hand, measures how much leverage assets are driving. For example, how many consumers are using a specific API or how many developers are accessing an enterprise’s assets? These metrics indicate if APIs are being used or if more investment is needed to improve functionality. Together, these KPIs measure the value of IT assets.
If done right, IT has the power to change the way organizations win. Goldman Sachs, Norfolk Southern, and GE certainly think so. What are you waiting for?